Wednesday, June 20, 2012

Treasuries Fall, Stocks Fluctuate Before Fed - Businessweek

Treasuries fell and U.S. stocks drifted between gains and losses as investors awaited the Federal Reserve’s policy statement. Spanish and Italian bonds rallied on bets European leaders will act to cut borrowing costs, while the euro rose as Greece began to form a government.

The Fed is due to release its policy statement at 12:15 p.m. in Washington and Chairman Ben Bernanke is scheduled to hold a news conference two hours later. Investors will be watching for signs the central bank plans to extend a stimulus program known as Operation Twist or embark on a third round of large-scale asset purchases, otherwise known as quantitative easing and nicknamed “QE3” on Wall Street.

“More people are beginning to believe the Fed will not continue Operation Twist or QE3,” said Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York, one of 21 firms that trade Treasuries with the central bank. “People are shedding positions. Some may have been expecting QE and are getting nervous so they are reducing positions.”

Extending Maturities

The yield on the 30-year Treasury bond rose three basis points to 2.77 percent. A Bloomberg News survey of economists two days ago showed that the Fed will probably decide today to expand Operation Twist beyond $400 billion to spur growth and buy protection against a deeper crisis in Europe. Fifty-eight percent of respondents said the Fed will prolong the program, which seeks to lower borrowing costs by extending the average maturity of the securities in the central bank’s portfolio. The current program ends this month.

The S&P 500 had closed higher for four straight days and reached its highest level since May 10 yesterday amid speculation policy makers will do more to safeguard the economic recovery.

The index has averaged a gain of 0.7 percent on days of Fed announcements since December 2008, according to Bespoke Investment Group, with an advance 71 percent of the time. The gauge averaged a gain of 0.5 percent before the announcements and a 0.2 percent advance from the time of the statement through the close, Bespoke’s study showed.

Earnings Forecasts

Procter & Gamble, the world’s largest consumer-goods company, declined 3.4 percent after cutting its earnings and revenue forecasts for the second time in less than two months as sales growth slows in Europe and the U.S. Adobe Systems Inc., the largest maker of graphic-design software, fell 4.9 percent for the biggest drop in the S&P as it forecast sales and profit that trailed estimates after it began selling its products via subscriptions.

More than two shares rose for every one that fell in the Stoxx Europe 600 Index. Aer Lingus Group Plc jumped 15 percent in Dublin trading as Ryanair Holdings Plc revived its push to purchase the airline with an offer valuing the company at 694 million euros ($883 million).

French President Francois Hollande said European leaders are exploring ways for the rescue fund to buy debt from countries that have taken fiscal consolidation measures. In Greece, political leaders agreed that New Democracy party head Antonis Samaras will lead a government that will seek relief from austerity measures tied to the nation’s bailout.

“There’s some talk about the ESM buying Spanish and Italian bonds and it looks like it’s going to be discussed at a European level,” said Padhraic Garvey, head of developed debt markets at ING Groep NV in Amsterdam. “That is giving Italy and Spain a short-term boost but it’s only talk at the moment, there’s nothing concrete.”

The yield on the German 10-year bund rose eight basis points to 1.61 percent and the two-year note yield added six basis points to 0.15 percent. Germany sold 4.005 billion euros ($5.09 billion) of two-year notes at an average yield of 0.10 percent.

The New Zealand dollar weakened against 14 of its 16 major peers after a report showed the nation’s current-account deficit widened more than economists estimated.

Japan’s Topix rallied 1.7 percent to the highest since May 15 after exports beat estimates.

Business leaders in the region are overwhelmingly confident about the year ahead, according to the results of a survey.

More than 80 per cent of bosses questioned during a conference in Reading said they felt positive about their companies’ prospects.

But there has been a big drop in support for the Government’s recovery plan and the burden of regulation is considered to be a key challenge for businesses.

Auditor KPMG, the Royal Bank of Scotland and legal firm Shoosmiths surveyed 100 people at the Thames Valley Business Leaders’ Dinner at the Hilton Reading.

According to the survey, 83 per cent of respondents said they felt confident or very confident about the prospects of their company for the forthcoming year.

Business leaders were also more optimistic than last year about the recovery of the UK economy, despite the double dip recession and turmoil in the Eurozone.

Forty-eight per cent said they expected to see the economy improve over the next 12 months, a five per cent increase on 2011.

However, surprisingly the affects of the potential fall-out from a Eurozone break-up did not feature heavily in people’s minds with only 48 per cent saying they had prepared for such an occasion.

Andrew Morgan, partner at KPMG’s office in Arlington Business Park, Theale, said: “In the face of significant global economic headwinds it is very encouraging that business confidence remains high in the Thames Valley.”

The survey showed a drop in support for the Government’s economic recovery plan with just 53 per cent saying they believed the plan was right, compared with 67 per cent last year.

Robin Barnes, regional director at The Royal Bank of Scotland, said: “Whilst the majority of businesses surveyed support the coalition’s recovery plan, they stressed the need to have the correct balance between growth and austerity.”

Emma Gibson, partner at Shoosmiths, in Apex Plaza, Forbury Road, said: “Increased regulation was listed by those surveyed as one of the biggest challenges facing their business at the moment.”

More than 100 business leaders attended the dinner on May 29 where broadcaster James Naughtie was guest speaker.

In a policy paper, China's cabinet blamed excessive exploitation and illegal mining for the decline.

China accounts for more than 90% of the world's rare earth supplies, but has just 23% of global reserves.

It has urged those with reserves to boost production of the elements, which are used to make electrical goods.

And in our Business Daily podcast, there's detailed coverage of the Earth Summit in Rio including reports from the world's largest iron ore mine, in the heart of the Amazon rainforest, and from Poland on cutting carbon dioxide emissions.

“The NHS medical director has written to trusts to tell them the only criteria of decision must be clinical and not financial.

"The Department of Health will look into any cases where they are using financial conditions."

Rationing treatments across the NHS is leaving patients with the "agonising" decision whether to pay for treatments which are available for free in other parts of the country, the shadow health secretary has warned.

Earlier shadow health secretary Andy Burnham said rationing by health bodies has led to 125 previously free treatments being restricted or even stopped in the last two years.

Patients in some parts of England are being forced to pay for operations such as or knee and hip replacements.

He called on ministers to launch a review into "crude and random" rationing in the NHS.

He said a number of the treatments which have been restricted seriously affect the quality of life of patients.

"Right now, a postcode lottery is running riot through the NHS in England," said Mr Burnham.

"We have identified 125 separate treatments which have been restricted or stopped altogether by at least one PCT (Primary Care Trust) in England.

"Thousands of patients across England are left in pain, discomfort or unable to live their lives facing the agonising choice of paying to go private or going without.

"There is a growing gap between ministers' complacent statements about the NHS and peoples' real experience of it. Ministers now need to act without delay."

Shadow health minister Jamie Reed said some of the restricted treatments are of "real clinical importance to patients".

Labour questioned all PCTs and Clinical Commissioning Groups (CCGs). Of the two-thirds of trusts that responded to the survey, 46% said they had restricted or decommissioned services in the last two years.

A quarter of trusts said they had rationed tonsil removal and 21 said they had restricted varicose veins treatment.

Knee surgery or replacement and hip operations were restricted by 21 and 18 trusts or CCGs respectively.

Cataracts treatment was restricted to patients in 16 different trusts across England.

Mr Burnham said Labour launched the NHS Check website to investigate reports of maltreatment of patients.

The site was launched after the party received reports of patients being denied treatments which were previously free.

He spoke about a female patient in Cheshire who was denied wart removal at her GP practice where she had previously had the treatment done free of charge. She was subsequently informed that a private clinic had opened in the same building offering the treatment at a cost.

Stocks are edging lower shortly after the opening bell as the Federal Reserve wraps up a two-day meeting.

Investors are hoping that the Fed will either keep buying long-term bonds to keep rates low, or at least signal that it's ready to act if the economy sputters. The Fed will release a statement at 12:30 p.m. Eastern time Wednesday.

A few minutes after trading opened, the Dow Jones industrial average fell 22 points to 12,815. The Standard & Poor's 500 index lost three points to 1,354 and the Nasdaq composite index dropped five points at 2,924.

A former member of Pearl Jam's management team has been charged with stealing $380,000 (£242,000) from the band.

Rickey Charles Goodrich was chief financial officer with Curtis Inc, the band's management company, when he is alleged to have taken money from the band's accounts. Prosecutors say he committed the theft beween 2006 and September 2010, when he was fired. He had begun working for Pearl Jam in 2005 and joined Curtis Inc the following year.

Goodrich has been charged with 33 counts of theft, and is expected to enter a plea on 28 June at his hearing at Seattle's King County Superior Court. Prosecutors say he transferred money from company accounts to pay debts he and his wife had accrued. He is also alleged to have used company credit cards to pay for personal items, including family holidays and wine.

The charging documents claim that hired investigators found Goodrich had claimed to have paid thousands of dollars to band-members and crew that remained unaccounted for. The band's manager had reviewed areas of their cash flow after becoming concerned by Goodrich's management of their money in late 2009.

According to the Seattle Post-Intelligencer, police claim the thefts cost the management company $556,000 (£354,000), including investigative expenses. Kelly Curtis of Curtis Management said, "We are deeply saddened by this situation," but added that he is "looking forward to a resolution".

Pearl Jam are due to headline the Isle of Wight festival this Saturday.